A company mines 300,000 tons of coal per year in a rural county. The coal is wor

Question

A company mines 300,000 tons of coal per year in a rural county. The coal is worth $79 per ton. The average price for a 2,000-square-foot house with three bedrooms more than 20 km away from the mining site in this county is $210,000. The average price for a similar, 2,000-square-foot house with three bedrooms within 4 km of the mine is 5 percent lower. Using comparative statics, what is the effect of mining on home prices in this county? Mining changes the price of a 2,000-square-foot home (with three bedrooms) by $ nothing

Explanation / Answer

Mining changes for the price of a 2,000-square-foot home

Solution: -10,500

Working: 210,000 * 0.05 = 10,500

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